Attorneys General Cuomo And Mccollum Urge U.s. Senate To Protect Students From Deceptive College Loan Practices
New York, NY (June 19, 2007) - New York Attorney General Andrew M. Cuomo and Florida Attorney General Bill McCollum, joined by 30 Attorneys General, urged the U.S. Senate to enact The Student Loan Sunshine Act, a new federal law to safeguard students and families nationwide from deceptive practices in the college loan industry. The House of Representatives recently passed this legislation in a virtually unanimous vote of 414-3.
In a bipartisan letter to U.S. Senate Majority Leader Harry Reid, and Senate Minority Leader Mitch McConnell, Senator Edward M. Kennedy, chairman of the Senate Education Committee and Senator Michael B. Enzi, the ranking member of the Committee; the Attorneys General requested that the Senate pass The Student Loan Sunshine Act without delay. Starting tomorrow, the Senate Education Committee will begin considering the Higher Education Amendments of 2007, during which the Sunshine Act is expected to be offered.
Similar legislation was recently enacted in New York to ban the deceptive practices exposed as a result of Cuomo's ongoing investigation into the widespread conflicts of interest throughout the $85 billion-per-year student loan industry.
"The crisis in the college loan industry calls for a national solution," said Attorney General Cuomo. "We need vision and leadership over ideology and partisanship. We need a federal law that will enhance the states' investigations of improper and illegal activities in the college loan industry. New York has already outlawed such illegal activities but college bound students across the country deserve similar rights and protections."
"The integrity of our higher education system should not be for sale," said Florida Attorney General Bill McCollum. "Students deserve full disclosure of all their loan options in order to make the best financial decisions for their education. Educational institutions have a responsibility to protect the best interests of those attending their schools and this legislation goes a long way towards ensuring this."
Cuomo's investigation, launched in February 2007, uncovered among other things, illegal steering to preferred lenders by specific schools and revenue sharing agreements between schools and lenders. Additionally, the nationwide probe also exposed gifts, trips and even stock in lender companies directly given to financial aid officials by lenders. In some instances, schools' financial aid call centers were directly staffed by lenders' employees who responded to student's inquiries about loan options. Investigations conducted by other state Attorneys General across the nation have uncovered similar conflicts of interest and deceptive practices in the college loan industry.
The new federal law will require schools to adopt a Code of Conduct, which is the basis for Cuomo's settlements with the nation's top lenders and dozens of schools across the country. Additionally, the law will:
- Ban revenue sharing between schools and lenders, bar gifts from lenders, outlaw participation in advisory boards of lenders and staffing of school financial aid offices by lenders.
- Require that "Preferred Lender Lists" be created only with the student's best interest in mind - a requirement that the New York Attorney General and other state Attorneys General have included in settlements with schools, and a requirement of New York's legislation - The Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007.
- Ensure access to the student's lender of choice, whether or not the lender is on a Preferred Lender List.
- Guarantee oversight of lenders offering private loans. Require that schools disclose federal loan options before students take out private loans.
- Compel lenders and institutions to fully disclose terms, conditions and incentives (e.g., philanthropic contributions) for all loans.
"Many of us have served in both Federal and State Government, and we respect the role of each. We are well aware of the power and responsibility of the Federal Government to resolve national issues with uniformity and consistency. This problem cries out for a federal solution that supplements the work of state Attorney General offices across the country," said the Attorneys General in the multistate letter.
In addition to Cuomo and McCollum, the Attorneys General from the following states have signed on to the letter: Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Iowa, Illinois, Hawaii, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, West Virginia and Wyoming.
Nationwide, two-thirds of all college graduates leave school with student loans, and the college loan industry has become an $85 billion per year business.
Cuomo's nationwide investigation into the student loan industry has resulted in agreements with the nation's five largest student loan providers - Citibank, Sallie Mae, JP Morgan Chase, and Bank of America, and Wells Fargo - as well as with Education Finance Partners (EFP) and CIT. Additionally, a total of 26 schools have committed to College Code of Conduct, nine of which have agreed to reimburse students over $3 million for the cost of revenue sharing agreements. Sallie Mae, Citibank, EFP, and CIT have also agreed to contribute $9.5 million to a national fund established by Cuomo that will educate high school students and their families about the financial aid process. Johns Hopkins has agreed to pay a total of $1.125 million to New York and Maryland Attorneys General. Columbia University has also agreed to pay $1.1 million into the education fund as part of a settlement with the Attorney General's Office. On May 7, 2007, the New York State Legislature passed the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007, which was sponsored at the request of Cuomo and is the first piece of legislation in the country aimed at ending the widespread conflicts of interest the student loan industry. Governor Spitzer signed the SLATE Act into law on May 29, 2007.
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